We have now finally filled that 1097 gap and now there's a gap above to be filled which is good news for the bulls given that in due time it should get filled as well....question is do we go lower first? Nothing notable to mention from the indicators. We are still stuck right in the middle of this trading range. Can the bears finally show some game? Every time I've said that during the past 4 weeks they have failed to follow through. Can they finally do it this time???
In case you didn't know, Bernanke was featured on the latest Time Magazine cover as "person of the year" thanks to his extraordinary efforts to avert Great Depression 2. This is very similar to the story ran by Time in February 1999 whereby Greenspan, along with Rubens and Summers were featured on the cover as "the committee to save the world". They came to the rescue after the collapse of LTCM in the fall of 1998 threatened to destabilize the financial system.
So, what can we decipher from this from a sentiment perspective? Well, first of all the 12 months that followed the 1999 cover story turned out to be a great time to be long the market. Ultimately however, the market made a major peak in March 2000 and dropped 50% in the 2 years that followed. Can we expect a similar outlook i.e. 1 year of gains followed by a big bear market? I wouldn't count on it.
Circumstances are a lot different this time around. In Greenspan's case, the collapse of LTCM didn't put as much as a scratch on the economy. Unemployment was near historical lows and consumer confidence near historical highs before and after the collapse. Bernanke dealt with a hell of a lot more than Greenspan did. This time around on the other side of the crisis, unlike in early 1999, unemployment is near historical highs and consumer confidence near historical lows however both are just now turning in the opposite direction. Therefore, there's a lot of room and time for things to get better unlike in 1999 whereby things were close to being as good as it gets.
Also, back then most people praised Greenspan whereas now, although Time is praising Bernanke, the typical retail investor seems to hate his guts. Take a look at the comment section from this article Every single person bashes him.
So, in conclusion I would not be so haste to view Bernanke on Time as a contrarian indicator. As I've noted many times since this blog was started in April, the entire rally that began in March has been given no respect. It's been hated the entire way and calls for a crash, double dip recession, the next shoe to drop or whatever are abundant. That folks is called a wall of worry which strongly suggests the market ultimately has a lot further to go on the upside. It's not going to be clear sailing the entire time by any means but I haven't seen a bear market, crash or reccession begin with this type of sentiment backdrop coupled with a steeply sloped yield curve.
It's easy to be bearish and difficult to be bullish longer term isn't it? If you agree then being bullish LT is probably the right path to take because in this game the easy (i.e. obvious) path is the wrong path to take in the LT. When you make money taking the easy path then it's likely that the trend you are riding is old and is going to reverse on you in a big way in the near future (6 months or less). Mind you, this tends to be where you see a blow off type move which can in fact be quite profitable if you get out before the music stops (such as the dot com bubble or other bubbles)....but few people do that.
Gold took quite a spanking today and made a new low since the drop that began since the begining of the month. It's going to be interesting to see if it can hold around these levels or go to 1050 wherby everyone and his grandmother are waiting to buy.
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